When it comes to mutual-fund investments, old school ties make a difference, says GSB assistant professor Andrea Frazzini. In a study published by the National Bureau of Economic Research, Frazzini and coauthors Lauren Cohen from the Yale School of Management and Christopher Malloy from the London Business School track mutual-fund asset data from 1990 through 2006, revealing that portfolio managers invest more in companies run by former college or grad-school classmates than in those without such links. The tendency is particularly clear when new portfolio managers take over, bringing with them different affiliations. As shown below, connected firms have at least one senior executive who received the same degree from the same institution as the portfolio manager, personnel and portfolio shifts correlate closely.

Noting the possibility that executives pass insider information to fellow alumni, the researchers also offer a less nefarious explanation: that fund managers know more about their old classmates and who among them would make a good bet.